The common stock has a beta of 1.2. The risk-free rate is 5 percent and the...
The common stock has a beta of 1.2. The risk-free rate is 5 percent and the expected return on the market (Rm) is 11 percent (so the market risk premium is 6 percent).
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What is the company’s cost of equity capital? Enter your answer as a percentage rounded to 2 decimal places (e.g., enter 5.25 percent as 5.25) |
Homework Answers
Cost of equity = Risk free rate + (market risk premium *beta)
= 5% + (6%*1.2)
= 12.20%
Hence the correct answer is 12.20
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I solved this problem incorrectly by doing
Kes=Rrf+(Betaesx market risk
premium)
Kes=0.052+(1.2x0.082)
Kes=0.052+0.098400
Kes=0.1504=15.0%
I'm not sure what I am doing wrong. Please show full
calculation.
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Sheridan Industries common stock has a beta of 1.2. If the
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I solved this problem incorrectly by doing
Kes=Rrf+(Betaesx market risk
premium)
Kes=0.052+(1.2x0.082)
Kes=0.052+0.098400
Kes=0.1504=15.0%
I'm not sure what I am doing wrong. Please show full
calculation.
X Your answer is incorrect. Sheridan Industries common stock has a beta of 1.2. If the market risk-free rate is...
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